Template-Type: ReDIF-Article 1.0
Author-Name: Karen C. Castro-González 
Title: INFORMATION CONTENT OF CHANGES IN PENSION PLAN FUNDING STATUS AND LONG-TERM DEBT
Abstract: This study investigates whether investors efficiently incorporate changes in defined benefit pension plan information in stock prices. The sample is comprised of public US companies with available data from 1980 to 2005. Fama and French three factor (1993) and four factor models results reveal that the market inefficiently incorporates changes in defined benefit pension plan information. The results suggest that investors are not paying enough attention to the implications of the changes in funding status for future earnings and cash flows. Investors’ reactions to changes in defined benefit pension plan information were compared to reactions to changes in long-term debt account ratios. The results reveal that the market is also inefficient incorporating changes in long-term debt information. Hedge-portfolio tests are performed to verify if there is an opportunity to outperform the market by identifying market inefficiencies. The hedge-portfolio results support the notion that the market overprices firms that have the most negative changes in funding ratio and increases in long-term debt ratio.
Classification-JEL: G14, G31, J32
Keywords: long-term debt, defined benefits pension plan, stock prices, four factor model
Journal: The International Journal of Business and Finance Research
Pages:  1-14
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-1.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:1-14

Template-Type: ReDIF-Article 1.0
Author-Name: Michael Adusei 
Title: DETERMINANTS OF BANK BOARD STRUCTURE IN GHANA
Abstract: The paper investigates the determinants of bank board structure in Ghana and finds that the Scope of Operations Hypothesis could explain the variation in board size but not board independence. On the other hand, the Board Monitoring Hypothesis could only explain the variation in board independence but not board size. The study also finds that cost-income ratio, foreign majority ownership structure and Ghana Stock Exchange listing status are positively and significantly associated with large bank board size. The paper, therefore, argues that as a bank grows in Ghana the size of its board of directors is likely to increase. However, the increase is likely to result in inefficiency of the bank. Furthermore, the study has evidence to conclude that banks with foreign majority ownership structure are not likely to appoint more independent directors.
Classification-JEL: G20, G21, G30, G34
Keywords: Board structure, board size, board independence, Scope of Operations Hypothesis, Board Monitoring Hypothesis
Journal: The International Journal of Business and Finance Research
Pages: 15-23 
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-2.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:15-23

Template-Type: ReDIF-Article 1.0
Author-Name: Lingyan Cao
Author-Name: Zheng-Feng Guo
Title: A COMPARISON OF DELTA HEDGING UNDER TWO PRICE DISTRIBUTION ASSUMPTIONS BY LIKELIHOOD RATIO
Abstract: This paper compares net profits from delta hedging through the Delta of a European call option, by assuming underlying stock prices follows a geometric Brownian motion (GBM) or a Variance-Gamma (VG) process. We employ the maximum likelihood estimation method to estimate corresponding parameters for each process. A Monte Carlo simulation is conducted to simulate spot prices and option prices and a likelihood ratio (LR) method is used to estimate the Delta of the call option over different sample paths. We then implement a dynamic delta hedging strategy through the simulated spot prices, option prices and Delta at different hedging frequencies. Finally, we compare net profits calculated from hedging corresponding to a GBM or a VG process.
Classification-JEL: G13, G15, G17
Keywords: likelihood ratio, Variance-Gamma, geometric Brownian motion, delta hedging
Journal: The International Journal of Business and Finance Research
Pages:  25-34
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-3.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:25-34

Template-Type: ReDIF-Article 1.0
Author-Name: Mine Aysen Doyran 
Title: EVIDENCE ON US SAVINGS AND LOAN PROFITABILITY IN TIMES OF CRISIS
Abstract: In 2008, market disturbances and unexpected price volatility besieged the US financial system. Since then weak balance sheets have heightened risk, thus resulting in an unprecedented rise in non-performing loans and credit-related write-offs in mortgage lending related sectors. This paper examines the determinants of US Savings and Loan (S&L) profitability in the time period 1978 and 2009. We use the recently developed unit root econometrics for time-series data analysis. Using ADF as a statistical test by estimation of least squares trend fitting, the study highlights that high leverage and large non-performing loan to total loan ratio leads to a lower rate of return on capital. In addition, the loan ratio has a significant negative coefficient on return on asset and equity capital. While macroeconomic factors such as low interest rates have a negative effect on bank earnings, the effects of interest rates can vary depending on the profit indicator used. By and large, there is evidence that the quality of loan portfolio rather than size (economies of scale) affects profitability negatively. Our results are confirmed by earlier studies that over-leveraging and under-performing loans have the potential to render S&Ls vulnerable to financial shocks, thus contributing to financial instability.
Classification-JEL: G21; B15; C50; E50; P16
Keywords: S&L crisis, bank profitability, economic development, subprime mortgage crisis, mortgage-backed security (MSB), IndyMac
Journal: The International Journal of Business and Finance Research
Pages: 35-50 
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-4.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:35-50

Template-Type: ReDIF-Article 1.0
Author-Name: E. M. Ekanayake
Author-Name: Aubrey E. Long
Title: TOURISM DEVELOPMENT AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES
Abstract: The objective of this study is to investigate the relationships between tourism development and economic growth in developing countries using the newly developed heterogeneous panel cointegration technique. This study examines the causal relationship between tourism development and economic growth using Granger causality tests in a multivariate model and using the annual data for the 1995–2009 period. The study finds no evidence to support the tourism-led growth hypothesis. The results of the FMOLS show that, though the elasticity of tourism revenue with respect to real GDP is not statistically significant for all regions, its positive sign indicates that tourism revenue makes a positive contribution to economic growth in developing countries. The results of the study suggest that governments of developing countries should focus on economic policies to promote tourism as a potential source of economic growth.
Classification-JEL: F43, L83, O40
Keywords: Tourism, economic growth, panel cointegration, causality
Journal: The International Journal of Business and Finance Research
Pages: 51-63
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-5.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:51-63

Template-Type: ReDIF-Article 1.0
Author-Name: Houda Hafsa
Author-Name: Dorra Hmaied
Title: ARE DOWNSIDE HIGHER ORDER CO-MOMENTS PRICED? : EVIDENCE FROM THE FRENCH MARKET
Abstract: This study examines the role of downside higher order co-moments in asset pricing models when stock returns are not normal. We test the effect of higher order downside co-moments using a data set of daily returns of Société des Bourses Françaises 250 Index stocks during the period 1987-2009. The results suggest that the downside Beta and higher order co-moments in the downside framework should be considered together when returns are non normal and that they out-perform the traditional beta.
Classification-JEL: G12, G15, C21
Keywords: downside Beta, downside higher order co-moments, CAPM, French stock market.
Journal: The International Journal of Business and Finance Research
Pages:  65-81
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-6.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:65-81

Template-Type: ReDIF-Article 1.0
Author-Name: Lie-Jane Kao
Author-Name: Po-Cheng Wu
Author-Name: Tai-Yuan Chen
Title: WHY DO BANKS DEFAULT WHEN ASSET QUALITY IS HIGH?
Abstract: Short-term financing, e.g., asset-backed commercial paper (ABCP) or repurchase agreements (repo), was prevalent prior to the 2007-2008 financial crises. Banks funded by short-term debts, however, are exposed to rollover risk as the banks are unable to raise sufficient funds to finance their long-term assets. Under such circumstance, banks’ equity holders need to absorb the rollover loss. Both deteriorating collateral assets’ fundamentals and market illiquidity are important drivers of the rollover risk. In this paper, we develop a structural default model based on Leland (1994), in which default is an endogenously determined decision made by equity holders, to analyze the joint effect of market liquidity and interest rate sensitive fundamentals of collateral assets’ on the survival times of banks relying on day-to-day short-term finance. The proposed model provides an explanation of the empirical observed phenomenon
that banks default even when the quality of their fundamentals is still high.
Classification-JEL: C41; C36; G17; G21; G33; G32
Keywords: Asset-backed commercial paper (ABCP), Repurchase agreements (repo), Rollover risk, Collateral assets’ fundamental, Market illiquidity, Structural default model.
Journal: The International Journal of Business and Finance Research
Pages:  83-96
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-7.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:83-96

Template-Type: ReDIF-Article 1.0
Author-Name: Kangrong Tan
Author-Name: Meifen Chu
Title: ESTIMATION OF PORTFOLIO RETURN AND VALUE AT RISK USING A CLASS OF GAUSSIAN MIXTURE DISTRIBUTIONS
Abstract: This paper deals with the estimation of portfolio returns and Value at Risk (VaR), by using a class of Gaussian mixture distributions. Asset return distributions are frequently assumed to follow a normal or lognormal distribution. It also can follow Brownian motion or Geometric Brownian motion based upon the Gaussian process. However, many empirical studies have shown that return distributions are usually not normal. They often find evidence of non-normality, such as heavy tails, excess kurtosis, finite moments, etc. We propose a class of Gaussian mixture distributions to approximate the return distributions of assets. This class of Gaussian mixture distributions, having good statistical properties, can accurately capture the above-mentioned statistical characteristics of return distributions. The model is applied easily to estimate the return distribution of a portfolio, and to evaluate the VaR. We demonstrate the model theoretically and provide some applications.
Classification-JEL: G10, G11, G32
Keywords: Gaussian mixture distribution, convolution density, portfolio, Value at Risk
Journal: The International Journal of Business and Finance Research
Pages: 97-107 
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-8.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:97-107

Template-Type: ReDIF-Article 1.0
Author-Name: Kira Hibbert
Author-Name: Ranjini Thaver
Author-Name: Mark Hutchinson
Title: AN ECONOMETRIC ANALYSIS OF JAMAICA’S IMPORT DEMAND FUNCTION WITH THE US AND UK
Abstract: This paper investigates Jamaica’s aggregate import demand function with the United States and the United Kingdom from January 1996 to September 2010 using cointegration analysis and error correction modeling techniques. Using real gross domestic product, relative price of imports, real foreign reserves and exchange rate volatility as our independent variables, evidence suggests a unique cointegrating relationship between imports and its regressors in both the US and UK models. We also examine the short-run and long run elasticities in both models. In the case of Jamaica-US trade, we find that income has a lower and negative elasticity in the short run compared with the long run. Relative prices are three times as elastic in the short run than in the long run. Volatility is negative in the long run, but positive in the short run. Foreign reserves behave the same irrespective of time. Overall, change takes place much faster in the long run than in the short run. In Jamaica-UK trade, GDP, and volatility are less elastic in the short run than in the long run, but real foreign reserves and relative price adjust much faster. Moreover, in contrast to the long run, real foreign reserves and volatility are both negative in the short run. Tight monetary policy has had a significant impact in the short run only in Jamaica’s import demand function with the UK, but not with the US.
Classification-JEL: F14, F31, F43, O54
Keywords: import demand, exchange rates, open economy growth, Jamaica
Journal: The International Journal of Business and Finance Research
Pages:  109-120
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-9.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:109-120

Template-Type: ReDIF-Article 1.0
Author-Name: Magdy Noguera
Author-Name: Carlos Omar Trejo-Pech
Title: THE DETERMINANTS OF CASH FOR LATIN AMERICAN FIRMS
Abstract: We examine the levels and determinants of cash in Latin America. Latin American firms, as opposed to U.S. firms, did not hoard cash during the 1995-2006 period. However, we find remarkable similarities with respect to the determinants of cash between U.S. and Latin American firms. Net working capital, capital expenditures and net leverage all decrease the levels of Latin American firms’ cash balances while growth opportunities increase them. Contrary to theoretical expectations, firm size and dividend payments seem to increase Latin American firms’ need for cash whereas cash flow volatility does not seem to affect cash levels. We provide a possible explanation for these deviations by disaggregating results by countries and industries.
Classification-JEL: G3, G32.
Keywords: Finance, Cash Management, Working Capital, Latin American Firms.
Journal: The International Journal of Business and Finance Research
Pages: 121-133 
Volume:6
Issue: 1
Year: 2012
File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n1-2012/IJBFR-V6N1-2012-10.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:1:p:121-133